Is Byju's In No Man's Land?
is seeking to raise $1 billion in funding in an attempt to avoid an investor revolt, days after its auditor and key directors walked out
Byju's troubles seem to be never ending. The edtech giant is seeking to raise $1 billion in funding in an attempt to avoid an investor revolt, days after its auditor and key directors walked out. Bloomberg, citing sources, reported on Tuesday that it was in advanced talks with potential new shareholders and offering them additional benefits like preferential treatment in case of liquidation.
The company held a shareholders meeting on Saturday after its auditor, Deloitte, and board members representing Peak XV Partners (earlier Sequoia Capital India), Prosus and Chan Zuckerberg Initiative stepped down last week. Byju's founder Byju Raveendran on Saturday clarified that while the board members had tendered their resignations, the company was yet to accept them, adding that the company was looking to enhance its board and add independent directors. Deloitte cited the delay in the yet-to-be-undertaken audit of...
Byju's troubles seem to be never ending. The edtech giant is seeking to raise $1 billion in funding in an attempt to avoid an investor revolt, days after its auditor and key directors walked out. Bloomberg, citing sources, reported on Tuesday that it was in advanced talks with potential new shareholders and offering them additional benefits like preferential treatment in case of liquidation.
The company held a shareholders meeting on Saturday after its auditor, Deloitte, and board members representing Peak XV Partners (earlier Sequoia Capital India), Prosus and Chan Zuckerberg Initiative stepped down last week. Byju's founder Byju Raveendran on Saturday clarified that while the board members had tendered their resignations, the company was yet to accept them, adding that the company was looking to enhance its board and add independent directors. Deloitte cited the delay in the yet-to-be-undertaken audit of Byju's accounts for FY 2021-22 as the reason behind its resignation. Deloitte's resignation has prompted the corporate affairs ministry to examine the nature of enforcement action it needs to pursue, as per reports.
Following the resignations, the company told investors that it will file its 2021-22 audited earnings by September this year and 2022-23 results by December. Byju's founder Byju Raveendran also assured shareholders that his personal investments in the company, including $400 million in the parent, $250 million for learning company Aakash, and $250 million through pledged secondary shares, remained intact.
Not just investors, but the company's employees are also looking to jump ship - an Economic Times report on Tuesday said almost half the company's employees were seeking jobs elsewhere amid layoffs and financial troubles. This, after reports surfaced last week of the startup delaying its employees' provident fund (PF) payments since October last year.
Warning Sign
That a company is still auditing subsidiary results and trying to reconcile them, is a warning sign in itself. Multinational companies, whether Indian or overseas with subsidiaries all over the world, don't dare to use this excuse, at least without inviting considerable shareholder ire. This is even more surprising for a tech company.
Why Would Investors Leave?
As per estimates, Raveendran owns a 25% stake in the company. Investors own close to 65% and other entities own about 10% of the stake. Board members, who were representatives of the investors, have now expressly quit – which begs the question, why?
It could be because of the Enforcement Directorate's (ED) raid at the company's premises in April, in connection with a case against the company under the Foreign Exchange Management Act (FEMA). The ED was investigating Rs 9,754 crore remitted to various foreign jurisdictions of about Rs 28,000 crore that the company received as foreign investments between 2011 and 2023.
While the investigation is still underway, the directors could feel that the enquiry itself is reason enough for them to get out or they might anticipate that there is more than meets the eye. Or it could be something else similar in character. The point is that without its key directors and an auditor, the company is in no man's land, or like a boat afloat.
